Cash vs Mortgage Financing: Which is the Better Option?

Is it better to buy a house in Kenya with cash or get a mortgage? Read on the advantages and disadvantages of each option.

cash vs mortgage

Most people dream of owning a beautiful home once they get to a certain point in their lives. Having a property with your name attached to it, whether it is a bungalow, an apartment or even a plot is seen as a status symbol. Not only this but owning a home can be a good source of income if you decide to rent out the property.

Making the decision on whether to buy your home using cash or get a mortgage can be a difficult one especially if this is your first time and you don’t know which is the better option. You might have saved enough cash to buy your house but then again you don’t want to go broke once you go that route. Or maybe you want to get a mortgage loan and pay for it over a certain time that you will agree on with your bank. You should look at both options thoroughly because it’s a big step to take.

READ ALSO: How to Use The Home Loan Mortgage Calculator

Cash vs mortgage financing has its advantages and disadvantages. Knowing what works best for you as you are looking to buy a home will help you get what you are looking for.

Advantages of Paying For a Home Using Cash

There are many reasons why you should make a cash purchase for your next home.

Enjoy Discounts

Realtors love it when you pay for a house in cash because this is ready money they can see. As they say, “cash is king”, therefore, you will get a house at a discounted rate on the price.

READ ALSO: Buying a House: Are You Aware of These Hidden Costs?

Sense of Security

Because you will not have a mortgage to pay for, you can relax knowing that you don’t have any debt to settle with the bank. You won’t have to worry about making monthly payments or interest rates that go high when the market fluctuates. Another advantage is you will not worry about losing your home if you are not in a position to repay off your loan.

Ease of Title Transfer

If you need immediate cash and don’t know where to get it from, you can always transfer your title deed or sell your house without the hustle of an underlying loan.

Disadvantages of Buying a House Using Cash

Loss of Liquidity

Paying all that money upfront will leave your pockets dented for some time. Therefore, it is important to be a cash buyer once you know you can have money left in case of emergencies. It’s not easy to access the money tied to your real estate property when you want to sell it. It makes it hard to get funds if you need them urgently.

You Can’t Invest Elsewhere

If you are in a position to pay cash for a home, chances of getting a mortgage loan are high. When you get the loan, then you can invest that money into other ventures which will make you money. However, if you do buy your home with cash, you won’t be able to invest the cash in other things which can bring higher returns.

You’re Not Guaranteed a Rise in The Value of Your Home

In today’s competitive real estate market, there is no assurance that the value of your home will increase. You might be unable to get a good deal if you ever decide to move or sell your house.

Purchasing Your Home With a Mortgage

The other option you can buy your next home is by taking a mortgage loan. This is a life-changing decision that you need to think through majorly. If you settle on this, you need to take some time to understand the lending process so that you are not caught in a situation where you are not able to make payments when required and also know what payments you need to make.

READ ALSO: Mortgage Application Process in Kenya: Step-by-Step Guide

Advantages of Getting a Mortgage Loan

Ease of Payment

Buying a house can be one of the largest purchases you will ever make in your life. And doing so through a mortgage loan makes it easier to pay for it because of the monthly payments. You will decide on the payment terms will your lender for ease of payment.

READ ALSO: Making a Down Payment on a House? Factors to Consider

Cost Effective

There are different mortgage plans you can choose from with reasonable interest rates depending on your situation. If you are unable to pay off the loan, the bank has a form of security – your home – which they can sell to pay off the debt.


Many people panic when they see the prices of property. However, that doesn’t mean that you should kill your dream of owning a home. Because of the different payment options, getting a mortgage loan will help you get your dream home when you want it without having to worry about the price.

Disadvantages of Mortgage Loans

High-Interest Rates

Interest rates of your loan can either fluctuate or rise. The lack of consistency means that you will be paying more than you actually borrowed. Because the loan is against your home, you need to make sure that you are constantly making your payments to avoid your home being repossessed.

Added Fees

On top of the interest fees you will be paying, there are other costs you need to pay for. These fees include insurance, legal, survey, penalty fees and many more.

Prolonged Debt

Nobody likes debt. Getting a mortgage loan might mean that you will be in debt for a long period depending on the duration you settle on for paying your loan. If you decide to make small monthly payments, your loan repayment may be prolonged for years.  


Is a mortgage better than cash?

It really depends. Mortgages offer individuals with the option of owning property without having 100% of the money required to purchase the property. However, the interests paid over time can be quite high depending on the interest rate of the lender. With cash, you get a discount as the process is easier and has less hassles.

Do you get discounts when paying cash for a house?

Yes. When purchasing a property through paying cash, you can get discounts of up to 20% depending on the property seller.

Why are mortgage payments much more expensive than cash payments?

The two main reasons mortgages are more expensive than cash payments are one, a mortgage is a loan, therefore, one has to pay interest and secondly, it involves more processes and time compared to cash purchases.

In conclusion, the decision to buy a home either with cash or through a mortgage lies with you. Weigh in the pros and the cons of cash vs mortgage financing. Take your time to understand the process of owning a home. Do your own research first then talk to an advisor, someone who understands the implications of both options.

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